Understanding Your Insurance Needs as a Distillery

As the owner of a distillery, you have unique business operations and risks to consider. Having the right types and number of insurance coverage is paramount to protect your business assets, employees, and bottom line. 

Distillery Property Insurance

One of the most basic yet important types of coverage for any business is property insurance. As a distillery, you have a significant investment in buildings, equipment, inventory, and more. Property insurance provides financial protection if any of those assets are damaged, destroyed, or stolen.


Covered Property Types

Property insurance for distilleries typically covers:

  • Buildings and structures used for the distillery operations, including aging cellars, still houses, tasting rooms, etc. Coverage applies to the building itself, as well as permanent fixtures like wiring and plumbing.
  • Manufacturing and processing equipment like stills, fermentation tanks, filters, bottling lines, and forklifts. Property policies cover accidental physical damage to this equipment from risks like fires and explosions.
  • Business personal property is not permanently attached to buildings, such as computers, furniture, finished goods inventory, and raw materials.
  • Improvements and betterments made to the leased property are also usually covered. This is important for distilleries operating out of rented facilities.

Valuable Policy Extensions

When considering property insurance for your distillery, it’s a good idea to add certain valuable endorsements or extensions to your basic policy:

  • Equipment breakdown coverage protects against mechanical and electrical failures in vital equipment. Since distillery machinery is sophisticated and expensive to repair, this is highly recommended.
  • Spoilage coverage reimburses the costs of alcohol inventory that is unusable due to accidental contamination or a covered loss like a power outage. Highly valuable for in-process and aging stocks.
  • Off-premises coverage extends protection for business personal property temporarily removed from the insured location, such as samples taken to trade shows or events.
  • Valuable papers and records coverage reimburses expenses to recreate essential business documents destroyed in a covered loss. Critical for distilleries and their recipes.

General Liability Insurance

As with any business that manufactures and sells products, general liability insurance is mandatory for distilleries. This protects your business from third-party claims of physical injury, property damage, and other liability exposures that may occur on your premises or arise from your products.

Bodily Injury and Property Damage

General liability covers legal damages if a visitor, employee, or delivery driver is injured on your property due to negligence. It also applies if your defective products or poor quality control harms someone off-premises. For example, if a contaminated batch made a customer ill or your bottling line shipped broken glass that cut someone.

Products Liability Risk

As the maker and distributor of alcoholic beverages, product liability is a significant exposure for distilleries. If consumption of your spirits causes harm, general liability insurance defends you in a resulting lawsuit and pays related damages up to the limits of your policy. This risk extends far into the future since some product defects may not surface for years.


Liquor Law Liability Coverage

An optional but prudent endorsement for distilleries is liquor law liability coverage. This protects against claims that you negligently served alcohol to an intoxicated individual who later caused injury. It also defends dram shop/social host lawsuits and any alleged violations of liquor control laws. Given the legal liability surrounding alcohol, this specialized coverage provides important additional protection.

Adequate Liability Limits are Crucial

When choosing general liability insurance, select high per-occurrence and aggregate limits commensurate with your business size and risk profile. At the lowest minimum, $1 million per occurrence and $2 million aggregate is generally considered adequate for small to medium-sized craft distilleries. Larger operations may need considerably higher limits.

Auto Insurance for Business Vehicles

Any commercial vehicles owned, leased, or hired by your distillery require commercial auto insurance coverage. This protects against liability claims that arise from vehicle-related incidents, such as:

  • Bodily injury and property damage caused by an accident while an employee is making deliveries in a company truck.
  • Cargo damage to distilled spirits shipments being hauled by your vehicles.
  • Towing and labor costs if a breakdown strands a vehicle carrying perishable alcohol en route to an event.

Comprehensive coverage also repairs or replaces insured vehicles involved in collisions not deemed the driver’s fault, as well as defending against accidental property damage claims. Collision coverage pays for repairs from incidents deemed the driver’s fault.

Distilleries with large fleets especially need higher commercial auto liability limits of at least $1 million per accident. Always check that insurance aligns with the requirements of your distributor customers and spirits authorities regulations as well.

Workers’ Compensation Insurance

As required by law in all states, distilleries must carry workers’ compensation insurance. This protects employees who are injured or become ill on the job. Benefits under the policy include medical bills, partial wage replacement during recovery, and lump-sum payments for permanent disabilities.

Workers’ comp also shields your business from costly employee lawsuits by being the sole remedy for on-the-job incidents, regardless of fault. Proper coverage helps ensure your distillery remains compliant and workers receive entitlements if hurt while furthering company operations.

The amount and type of coverage needed are based on your industry, payroll expenses, and state regulations. Working with an insurance professional ensures you meet all state requirements at optimal rates, given your payroll size and historical claims experience.

Package and Umbrella Liability Policies

To achieve higher overall liability protection beyond just general liability limits, many distilleries purchase both package and umbrella policies. These work in tandem to provide enhanced coverage layers.

Package Policies

A commercial package policy bundles multiple common business coverages together at a discounted combined rate. It typically combines general liability, auto liability, property, crime, and sometimes workers’ compensation in one convenient policy.

Umbrella Liability Insurance

An excess or umbrella liability policy provides valuable protection above the limits of underlying general liability, auto liability, and employer’s liability insurance. For example, if you have a $1 million general liability limit and $1 million umbrella policy, the total available coverage limits are $2 million.

Umbrella policies are quite affordable, given the significant protection they provide. Distilleries of all sizes should seriously consider this type of excess liability insurance to expand total coverage for a relatively small additional premium cost.

Directors & Officers Insurance

As an organized business entity, limited liability companies (LLCs) and corporations face potential legal threats in the form of bylaw claims and shareholder lawsuits. Directors & Officers (D&O) insurance protects your business leaders and managers from the personal liability and legal defense costs they may incur if sued derivatively.

It defends board members, executives, owners, and anyone acting in an official capacity against allegations of wrongful acts, errors, omissions, or misleading statements. Common triggers involve negligence related to financial controls, acquisitions, employment practices, regulatory compliance, or mismanagement allegations.

Especially for distilleries with substantial assets at risk and multiple stakeholders, D&O coverage provides valuable reassurance for those guiding organizational decisions and oversight responsibilities each day.

Choosing an Insurance Provider

With a solid understanding of key coverage needs in place, let’s shift our focus to selecting reputable insurance carriers and brokers who specifically understand the alcohol beverage industry.

Specialized Distillery Insurance Agents

Given specialized liability exposures and regulatory peculiarities, your best resource is an agent who focuses solely on craft distillers and distilling insurance. Look for those with experience writing multiperil packages tailored to distillery operations.

These specialists stay up-to-date on changes impacting alcohol-related risks and can guide you in complying with unique liquor authority insurance rules. Ask referral sources like your statecraft beverage guild or larger distilleries for top agency recommendations in your area.

When interviewing prospects, inquire about their partnerships with appropriate A-rated carriers, not just who provides the lowest rates. Finding the right balance of coverage and carrier financial strength is most important over a few dollars in savings.

Evaluating Insurance Company Financials

While broker expertise is invaluable, you’ll ultimately be relying on the insurance carriers themselves to pay substantial claims if losses occur. Always verify proposed underwriters maintain:

  • Minimum A.M. Best financial strength ratings of A- (Excellent) or better to feel confident adequate reserves exist.
  • Experience specifically serving the beverage alcohol space with designed policy forms, not just a general appetite.
  • A favorable complaints ratio and reputation for timely, good faith claims handling according to industry reviews.

A specialist broker should willingly share or direct you to this vetting information upfront versus pressuring a fast quote approval. Strong capitalization provides the reassurance needed for your protection plan.

Additional Risk Management Considerations

Beyond proper insurance, implementing prudent risk management practices and workplace safety protocols further protects your people and the bottom line over the long haul. A few suggestions distilleries should incorporate:

  • Train all employees on safe chemical handling, fire safety procedures, and emergency protocols to minimize risks of accidents
  • Maintain updated safety data sheets (SDS) for all chemicals and substances used in distilling and documentation of employee training
  • Invest in fire detection and suppression systems appropriate for your facility, along with regular inspection and compliance with codes
  • Practice responsible contract drafting, reviewing all agreements with legal counsel to manage vendor, contractor, and customer liability exposures
  • for aging rooms/warehouses, consider humidity and temperature monitoring systems to promptly detect environmental issues
  • Enact physical security measures like locks, alarms, and video surveillance equipment to deter theft and vandalism on-site
  • Require a certificate of insurance from all subcontractors listing your business as additional insured to extend protections for your interests
  • Consult legal counsel to stay on top of ever-changing regulations regarding production, taxation, labeling, and more at both state and federal levels

Implementing a comprehensive risk control program backed by proper insurance empowers distilleries to feel secure pursuing growth objectives with risks suitably mitigated. Remember, an ounce of prevention is worth a pound of cure when it comes to minimizing potential losses over time.


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